The poor performance of office REITs is holding down the recovery pace for the real estate sector, according to the S&P Global Ratings 2025 Real Estate Industry Outlook. With a negative rating, leverage for U.S. office REITs is still elevated compared to other property types. Material improvement is unlikely, due to low utilization and poor tenant retention.
However, office REITs’ operating metrics are beginning to stabilize, says the outlook. And with recent interest rate cuts, access to capital is increasing.
Looking forward to 2025 for U.S. REITs, borrowing costs may remain elevated, due to the slow actualization of rate cuts. This may put a pause on the acquisition interest. After 2024’s three rate cuts, the Fed is now expected to proceed with more cuts in 2025, but at a much slower rate. However, interest rates remain elevated and could pressure credit metrics as debt maturities are refinanced at higher rates, says the outlook. Refinancing risk fo
